Rural Affairs, Climate Change and Environment Committee

Meeting date: Wednesday, September 11, 2013

Official Report 397KB pdf

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Crown Estate

Under the second item, we will take evidence from the Crown Estate. I welcome the panel, which is led by Gareth Baird, the Scottish commissioner. We are also joined by Ronnie Quinn, the lead for energy and infrastructure in Scotland, and Alan Laidlaw, whom some of us met recently at Glenlivet. He is in charge of rural and coastal portfolio issues in Scotland. Welcome to all of you.

Do you wish to make a short opening statement, Mr Baird?

Thank you, convener. We are absolutely delighted to be here again with you and we welcome the opportunity to make an annual appearance before the committee.

I know that some of you were up at Glenlivet over the summer. I hope very much that you enjoyed your visit there. It is an extraordinary part of Scotland. As you may well know, I am a farmer and one of my first visits as the Scottish commissioner was to go up there immediately after the huge snow storms. With the damage that it sustained, I was amazed by their toughness, their stockmanship and the way that they came through that awful period.

We would like to extend an invitation to you all to visit other parts of the Crown Estate in Scotland. Perhaps we could come on to that later when we discuss aquaculture and renewable energy. We have worked hard in preparation for our appearance before you this morning, so I hope that we have all the answers that you need.

Claudia Beamish will begin with a question about the Crown Estate.

Good morning to the panel, and welcome to the Parliament. Can you clarify for the committee how the commissioners for the Crown Estate are commissioned? How are the commissioners appointed?

Certainly. The positions are advertised very widely through newspapers, the website and everywhere you would expect. There is a very stringent selection process. The best way for me to explain is to take you through my personal experience.

I saw the advertisement in The Sunday Times, I applied for the position, and then there was the usual streaming that you would expect with a selection process. I was called to attend an interview, and I then had a second interview at the Treasury in Whitehall. On that panel was the chairman of the Crown Estate, an independent member, somebody from the Treasury and some of the other commissioners of the Crown Estate. The panel then made a recommendation and passed two names, with a preferred candidate, to the Treasury, and that recommendation was supported. The process is therefore very open indeed.

We have been going through that process recently, as one of our commissioners has come to the end of their tenure. There was a very wide application for that post.

What range of advertising would be done for the Scottish commissioner? You may not be able to let us know now, but I am interested in what you said about where you saw the advert. How widely is the post advertised?

I can find out. I saw the advert in The Sunday Times. I do not know about the national papers, but we can find that out for you.

That would be very helpful. Thank you.

We now have questions from Graeme Dey on the structure of the Crown Estate in Scotland.

Thank you, convener, and good morning, gentlemen. In your Scotland report, there is a reference to 38 people being based in Scotland with wide-ranging expertise:

“Most are based in our Edinburgh office with 12 based in other parts of Scotland including our rural estates.”

That would give the impression that the majority of your staff are potentially desk-bound in Edinburgh, which I suspect is not the case. Could you expand on that for us?

Certainly. As you rightly say, the office is in Bell’s Brae, just at the Dean bridge—and let me just say that we would love to welcome you down there, just to see exactly what goes on. I remember that, when we had the members of the Scottish Affairs Committee down there, they found it a huge benefit to see exactly what goes on in the central office.

As you know, we have managing agents around Scotland. In response to recommendations from the Scottish Affairs Committee, we have really upped our game in getting out around Scotland. That has been, I hope, very beneficial for our stakeholders—it has certainly been very beneficial for our team and, I would say, particularly for me in understanding more about what goes on around Scotland.

The final thing that I would say is that we have just been looking at the apportioning of costs towards Scotland. We reckon that 90 people out of the London office are involved in managing the Scottish estate, and they are here on a pretty frequent basis.

I do not know whether there is anything that my colleagues would like to add.

I would certainly suggest that our team is not desk-bound when you look at the travel that they do. They are domiciled at the Edinburgh office, but as we all know, with mobiles, BlackBerrys and so on, we are all pretty much wired for sound and can communicate anywhere.

One current example is the Marine Scotland consultations that are happening all around Scotland. We have members of the team going to meetings in Fraserburgh, the Western Isles, Campbeltown, Dumfries and Galloway and beyond. Two of us shall be in Gigha next week, a couple were in the Western Isles last week, and we are in Inverness three times this month. It is easy to say that we are based in Edinburgh, but the travel is wide and varied, and that is deliberate. We cannot manage the assets, given the dispersed nature of the portfolio, without being on the ground.

Gareth Baird talked about the managing agents. They represent the Crown Estate right around Scotland from their bases, and we work very closely with them. I can think of my travel over the past month and what I have ahead of me: Aberdeen, Stonehaven, Inverness, Cromarty, Glenlivet, Gigha, Dumfries and Galloway, Inverness again, and the Lothians and the Borders. That shows that there is a fairly wide representation, and I know that some from Ronnie’s team were at some of the meetings up in Caithness at the Pentland Firth last week.

I hope to assure you of just how serious we are about taking on the SAC recommendations. Over the past year, we have taken on two extra members of staff to help us to co-ordinate getting out to other areas of Scotland, particularly to release these guys and other members of the team. I think that we have been very successful in releasing them. I therefore hope that we are getting up to the bar on that.

I have just two points.

One is that I have had the opportunity to go back through my notebook and look at the number of visits. In September alone, it looks like I have ahead of me four trips to Inverness, two to Orkney and one to Glasgow—those are the main ones.

My other point is that, in addition to the staff based in Bell’s Brae, quite a lot of people come up from London on a regular basis and work out of Bell’s Brae as well. The numbers in the report are those that are based wholly in Scotland, but there are additional people who come up from New Burlington Place.

Can you just expand on that? You say that up to 90 people come up from London—to do what specifically?

There are a number of different aspects. There is information technology support; we have geographic information system people coming up; we have some planning people coming up; and we have some commercial people coming up, as well as, I am glad to say, some of the directors, who come up on a regular basis. In fact, the director of energy and infrastructure was up yesterday with some other managers. There is a whole number across the board who come up to Edinburgh.

This is not a trick question—after I asked the original question—but given the amount of travel that Crown Estate staff have done, has any thought been given to locating staff in other parts of the country, in order to reduce carbon footprint for example?

Yes, there has been and that is part of the outsourced model that we use with managing agents, so that we have local people who are able to react and respond. With the best will in the world, if something comes up quickly and in an emergency, being remote is not ideal.

One of our challenges is to make sure that we all know what is going on across the piece. One of the great strengths that we can bring to a lot of the projects that we are involved in, and a lot of the communities, is experience from other parts of Scotland. That is something that is very often welcomed. There is a central base, and in the same way that this group is gathered here in Edinburgh despite representing the far corners of Scotland, we have a practical base and we do as best we can about carbon and travel.

A lot of our assets are in very remote areas. Let us not take the debate in the way of rural public transport and that side of things, because a lot of our sites are pretty challenged from our point of view.

Thank you. On the organisational issue, I think that Jim Hume has a question.

Thank you, convener, and good morning to all.

I am interested in an announcement that was made a year or two ago regarding local decision-making by the Crown Estate. There was talk of having local community groups that would be able to influence the Crown Estate in certain local areas throughout Scotland. I was just wondering about the progress of that: what are the machinations of these groups and, if they have been set up, how are they set up?

That work is going forward on a number of fronts. First—taking things from the top—as you will be aware from the report, we have set up our management board in Scotland, which meets four times a year. We have on-going communication and engagement with the Scottish liaison group, which represents more than 20 stakeholders.

As, to some extent, the Scottish liaison group was a victim of its own success—people were engaging very readily and, with 20 or more different stakeholders, we could only go broad and shallow—this year we have changed the group and broken it down into sectoral groups. We will still have a central meeting at Bell’s Brae once a year, but we have now committed to go out and meet the sectoral groups so that we can go much deeper into their activity.

Alan Laidlaw and Ronnie Quinn—and indeed our chief executive, Alison Nimmo—have been out meeting a lot of the local authorities throughout the year. So far, in sectoral groups, we have had very good meetings with energy and infrastructure interests and with the aquaculture industry.

On community engagement on a local basis, you will be aware of our local management agreements. I am delighted to say that that approach is now developing a bit of momentum. I am sure that you will have seen the documents that I have here on the local management agreements and the toolkit for customers and communities, which is about how they can engage with us.

There is the marine stewardship fund and there are local management agreements, particularly on moorings in Scotland. Looking at the big picture, I suppose that you might think that local moorings are not a huge issue, but I can assure you that things get pretty fired up on them locally.

10:15

That is the picture from the top right down to local communities. As far as local community decision-making is concerned, we are very anxious to hear from local authorities, managing agents and communities themselves, particularly when local management agreements can be taken forward to benefit those communities, who will manage and run the initiative that comes forward.

How have these local area management groups been set up?

The local management agreements look to identify where there is an aspiration or plan to do something and a community wants a starting block.

We all probably know of the circle that you cannot get funding until you have an agreement and you cannot get an agreement until you have funding. There can be a merry-go-round until you can get a fixed point. The LMAs were designed to start that fixed-point process so that, without entering into significant cost or time burden, a community can start a discussion with us. If you are a properly constituted group, you can quickly get an agreement from us, which can start the funding process.

Different organisations come in with different schemes. It might be that a community has an idea but has not really developed it—it can start there—or it might have a developed idea and have already applied for fisheries funding, coastal communities funding or National Lottery funding. The agreement depends on what stage the scheme is. We were very conscious that we did not want a one-size-fits-all approach because each community organisation, community council and community landowner is different.

The first starting process could be relatively organic, or it could be that we note that there are a number of issues in an area. For example, there are often different interests in a bay, with perhaps four different separate interests across the piece. We ask how we can get those interests together to help to do something.

I can think of one group that we are working with at the moment on that basis. We are putting in some funding to help it to develop its plans. The group has a really good workable proposal: it has aspirations to take over an asset from the local authority and to transfer the management into its hands. There are—let us say—a number of different interests in the community, so we have offered to help fund a little bit of work to draw everything together with a view to creating the opportunity a little more quickly.

That is useful. Thank you.

Following up on that, are the minutes of these meetings publicly available? If so, what form do they take?

As regards the minutes of the initial meetings, it depends on the group. If it is a community council meeting and the issue is an agenda item, the minutes will be available. However, some of these meetings are more like mediations, with different parts of a community coming together—as elected members, you will all be familiar with that kind of meeting. Those meetings would not always be formally minuted; they would tend to have action points to say that, for example, it was agreed that the Crown Estate would give the group an LMA and that it would go ahead from there.

The initial organic discussions tend to be relatively informal. There might be one or two people who want to start the discussion before going to the next phase. If it was a community council meeting, it would be minuted by the community council rather than by us.

Where would those minutes be available if committee members or members of the public wanted to look at them?

We do not have a central register of community council minutes—the councils would hold them themselves—but if there are particular meetings in which you are interested, we would be happy to provide details of them.

I am just trying to understand where accountability to the public lies. I respect the fact that there are times when there is mediation and discussion, which may be done in private in order to resolve the situation, but I am wondering, in terms of accountability, how the public can understand how things are proceeding, to put it positively.

Most of these discussions are held with community groups that are already constituted—one of the criteria for an LMA is that there will be a properly constituted public group—so most of the meeting minutes will be held with them rather than with us.

Thank you. I have another brief question, which also follows on from Jim Hume’s questions, on the criteria for your work as the Crown Estate in Scotland

Please correct me if I am wrong, but I understand that, in 2012-13, £13.7 million was paid into Her Majesty’s Treasury from Scotland and £9.6 million was invested in Scotland. I am sorry if I have got that wrong. Having been to Glenlivet and seen the connections that you make with the community, such as with cycling and the young couple who were involved, I am trying to understand what your criteria are, if they exist, for getting involved. Does it have to be with a business that has to put profits back into Her Majesty’s Treasury? Is profit always the criteria? If not, how do you judge when to take things forward in terms of, say, sustainable development or community involvement?

If you look at how we invest our funds, you see that we agree an investment strategy on the areas we are looking to invest in. Those are areas where we believe there are opportunities for growth and where there is a robust investment rationale behind the overall business. For the investment in the mountain bike trails in Glenlivet, for example, one of the main drivers, as we discussed, was the challenge that Tomintoul was feeling and what we could do as an owner in that area.

We had to make sure that there was a commercial return on our investment. We have to deliver best value under the Crown Estate Act 1961, but it does not ignore good estate management—the act actually says that we have to have regard to good estate management. Our investment will give us a commercial return. We have managed to lever in funding from Europe, Highlands and Islands Enterprise, the national park and Moray Council. That has helped make the return evident: if there had not been match funding, it would have been very challenging.

Beyond that, at the end of all of the investment proposals that we consider, we look at the positive impact for people, communities and that side of things. The investment is an opportunity to put something in an area that will benefit our other businesses on the estate, such as accommodation providers or diversified farmers who have holiday cottages or want to offer agri-tourism. That is a non-financial element that is included in the investment decision, and we would try to ensure that we were making a difference to all of those things.

This year, we have produced a total contribution report that looks in an integrated reporting fashion and says, “This is what the benefits of the Crown Estate’s actions are in the wider sense.” That can be pretty challenging in terms of valuation and quantification, because people want to get natural capital into pounds, shillings and pence, which is not easy. However, we are trying to ensure that we are commercial while having regard to good management and the wider benefits that we can bring.

There are a number of points to consider before we move to the second part of the question, which Claudia Beamish asked about. While the last point is still fresh, we will have questions from Nigel Don, then Alex Fergusson, then Dick Lyle.

I think that I heard you say you want to be commercial, but that you are also looking at the community benefits. I believe you when you say that, but does that not give you a problem? If you are managing almost £8 billion-worth of assets for the Treasury—I think that that is a simple statement of what the Crown Estate does overall—I think that the Treasury would expect you to give it the best possible return for its £8 billion.

Given that you could invest that straightforwardly in property, which would pay you a return and cause you no trouble—I am simplifying that—how on earth do you explain to your masters in the Treasury that you would prefer to put that money into a small business in Glenlivet because of the community benefits there? How do you have that dialogue with the Treasury? I do not think that they are all demons—this is not a political question—but how on earth, as a matter of investment, do you balance those two, because you will not get the same return in pounds, shillings and pence?

You have hit on a real issue for us. First, it is a very difficult balancing act and the discussion is quite difficult at times. However, within the DNA of the Crown Estate is a long-term view of investment in just the communities that you are talking about and trying to drive forward all the United Kingdom assets that are managed by the Crown Estate.

I will give you two examples. There is the on-going cash that we are putting into aquaculture research to try to drive that forward. That is particularly appropriate at the moment given the targets that have been set by the Scottish Government for the aquaculture industry, which is a fabulous industry. That is excellent. Another example is that £500,000 is going into research on seaweed around the United Kingdom coast; most of that will be around the Scottish perimeter. That industry is just a germ at the moment and we are acting as a catalyst, if you like—almost a sort of seed funding—to try to drive it and grow the industry. That is a huge opportunity for the nation and indeed for the coastal communities.

One of the challenges lies in comparing the competition for capital, if you like—you could put it into another pot and get a higher return. Nobody is immune from the vagaries of the property market, whether they are pension holders, investors or private owners. Key to the Crown Estate’s resilience is our having a diversified portfolio. If we had all our eggs in one basket and the central property market disappeared down the drain, which is not that historic—we have been reminded of the possibility of that—that £8 billion would very quickly be significantly reduced. Indeed, at that time, the fortunes of the rural economy were slightly different and the fortunes of the energy environment and the coastal environment were different and that helped to spread the vagaries. With regard to good management, having a balanced portfolio is one of the key strengths of the Crown Estate.

I accept that, but having a balanced portfolio is one thing and having a deliberate policy of trying to develop the economies of parts of our nation is something different. I entirely buy the balanced portfolio, but—if we ignore that for the moment—if that is one of the things that the Crown Estate wants to do and it is in its DNA, why does it not do more of it? You have an awful lot of money tied up in bricks and mortar, for example; if that is what you wanted to do, that money could be released to do more of the things that you have eloquently spoken about. Actually, you do not do very many of them, in money terms.

That is a fair point; it is all around the balancing act that we have to do. As I am sure you know, the Crown Estate is not allowed to borrow money, so we have to have a base load that is producing good revenue to allow us to go out and perhaps be a catalyst. We have to address that balance and there are discussions, depending on people’s views on either side. You have to go out and make more cash, or you have to act in an innovative fashion around perhaps the lesser yielding assets that the Crown Estate manages.

Is that an internal discussion, or a discussion with the Treasury?

10:30

We are set targets by the Treasury, for both income and capital, on an annual basis. We have to do our best to meet those targets.

So the level of innovation—I think that that is the word you used—that you can bring to bear depends on your plans for how you will meet those targets.

Yes.

Is the Crown Estate subject to freedom of information legislation?

Yes.

I will go back a step, convener, if I may. The first part of Claudia Beamish’s question was about local management agreements, which I am interested in. I like the idea that such agreements very much envelop a bottom-up approach, in that any individual stakeholder, if necessary, or group of stakeholders, can come to you and say, “This is our proposal”, and you will work with them to try to bring that about.

I have two questions on that. First, how have you ensured that every one of your stakeholders is aware of the potential of that structure? Secondly, can you give us any examples of groups of stakeholders or individuals who have come to you with proposals that you have not been able to take forward? If so, why was that?

How have we promoted the availability of local management agreements? We used the signing in December of the first two pilot schemes to generate press coverage. That was on BBC Highlands, BBC Alba and BBC Radio Scotland; it was also covered heavily in various print media. We have included it in two of our Scotland newsletters, which are circulated to something like 2,000 individuals and stakeholders. LMAs have been discussed with the local authorities in all the coastal areas, as well as with the Convention of Scottish Local Authorities. If you know of any groups out there that we do not know about, I would ask them to get in contact. The LMA brochure is available, and we would be delighted to get that on the ground.

Examples of our not being able to help are quite thin, because where an LMA might not be appropriate, there might be another opportunity to have a discussion. In one case, the discussion was so far advanced that an LMA was not required—we went straight to a lease and worked with the stakeholders on that side of things. I think that there is a real opportunity and a move on the ground to help the coastal areas with LMAs.

I mentioned the circle earlier—it is always difficult to get the first foundation stone in the ground. Next week, I am away to Gigha to complete the paperwork on an LMA. We got a phone call from the people there, saying “We’re struggling with a few things; I’m not sure how you can help, but can we have a chat?” Half an hour later, we had agreed an LMA, and within a few weeks the draft documentation was on its way. The people there said that that was ideal, because it lets us go to the next steps.

If we can continue having such discussions with communities that want to do things, I think that this will gain a lot of ground. We need help to get that message out there; local authorities, in particular, will be dealing with groups that are looking to take assets off them, and looking at fisheries funding, coastal communities funding and lottery funding. If any of you know of constituency matters that you think are appropriate, please get in touch and we will have a conversation.

Where there are significant commercial interests, the situation will become more challenging and a standard discussion will be needed on how we interact with that. I can think of a number of engagements that we are having from there at the moment, potentially looking at putting in funding as well. An LMA is the start of a process to potentially take a lease, but it could also unlock marine stewardship funding, where we support different projects around the coast, or direct capital investment. The LMA is a first, light-touch engagement, so that people can say, “We understand where the Crown Estate is coming from.”

Can you put a figure on the number of LMAs that are either in place or in the process of being agreed?

We have three in place at the moment; one is being signed as we speak; and three are in active discussions. A number of communities have asked for information. One of the keys is dealing with communities, and it would be very arrogant of us to say that a community must sign an LMA before it makes any more progress.

Some of the discussions might take quite a while to come to fruition. I can think of a number of communities that have asked questions about LMAs and had discussions with our mooring officers or managing agents, or with me and my team, and have then gone quiet for quite a while. I can think of one project that fell in the last year and on which we had been in discussions for seven years. That was before LMAs, but there is an organic process on the ground that may or may not happen. I am very conscious that we do not want to be prescriptive and say, “Thou must sign an LMA before you can progress.’” The group has to form itself and get that initial stage passed.

Sticking with the coasts and coastal fund, we turn to Richard Lyle.

Thank you, convener. I will come to the point about coasts in a second, but I want to get this in first.

In the “Delivering with expertise” report, there is a balance sheet that basically says that your revenue was £13.7 million and that the surplus was £11.6 million. In terms of your revenue by activity, your highest income is coastal revenue at £3.6 million, which is up from £2.7 million last year. That is about 25 per cent of your income. Do you have all of the coast of Scotland, and is the money that is raised through that just taken away and shipped down to the Treasury in London, or is some of that money invested locally? Is the money that is raised locally spent locally? You have a coastal fund, so what sort of activity do you do in order to promote activity in local areas to ensure that money raised there goes back to the community?

I am sorry; there were a lot of questions there.

I took some notes to make sure that I would cover them all.

The first question was about the coastline that we own. We own approximately 50 per cent of the coastline of Scotland. There are other ownerships, including Government ports and harbours and other private landowners that own foreshore. That is the bit that gets wet and dry every day—the two lines on a beach between where all the seaweed is and mean low water. We have seabed interests beyond low water, out to 12 nautical miles. So, we have approximately half the coastline of Scotland, which is still a lot.

Coastal income is quite a varied pot. It includes income from ports and harbours, and from moorings and agreements for outfalls and for any use of that piece of property. The queries relating to the coastal estate that come from different types of users never cease to amaze me. There are also seabed leases for structures in that area. Ports and harbours are a significant piece of the income jigsaw.

In terms of revenue raised, you touched on the coastal communities fund in Scotland, which is administered through the Big Lottery Fund. That is administered from London; we are not in control of that, but the money comes back to Scotland from our marine interests to go into schemes that may unlock community projects. One of the main objectives of the coastal communities fund is to enable economic activity and growth. I stress that we do not administer that fund; it comes from the Big Lottery Fund back to Scotland.

We are looking to increase that opportunity by investment. Some of the discussions that we are having are about different coastal asset managers and users who want more activity and whether we can unlock that. An example that, sadly, did not come to fruition was the Oban bay project, of which we had been a long-term supporter, with a funding line of capital available for the project. Unfortunately, the project has not progressed but that is the sort of thing that we want to invest in, to grow the opportunity. In the long term, that will increase the scale of the coastal communities fund, albeit indirectly.

The point that I was trying to get at, and which you have just confirmed, is that money raised from coastal activity in Scotland is shipped down to London. If you want to have projects undertaken locally or the money to be put back into that community, that is also dealt with from London. So, you have no control at all.

The coastal communities fund is administered by the Big Lottery Fund in Scotland, but it is not something that we control. In terms of investments on our side of things, I am responsible for looking at investments around the coastal and rural estates and identifying where those meet our investment criteria. That is done by me and I can work under a delegated authority principle, to a certain level. If someone were to come forward with a port or harbour proposal, or a marine leisure proposal—a lot of marine leisure discussions are taking place, particularly on the west coast—we would sit down to discuss the proposal with our local team. There are two of us in Edinburgh who would look at those individual proposals and identify whether or not we could invest.

I take it that you were slightly mistaken when you said that you own the foreshore; you actually have the responsibility for it.

Yes.

I would like to develop the matter of the beaches. Most members around this table represent constituencies and regions that have beaches. Do you have responsibility for a sizeable number of beaches in Scotland?

It depends what you mean by responsibility and whether you mean management. There is a public right of access to beaches in Scotland and beaches tend to be managed by local authorities or other organisations.

That is what I want to explore. I would like to clarify the relationship. Work such as removing litter and protecting the condition of the beaches seems to fall to local authorities and interest groups, yet in your report you talk about donating

“£30,000 to the KIMO Fishing for Litter initiative”

and a recycling group in Argyll and Bute. What is the specific nature of the relationship? Do you have responsibility for the beaches, or does it belong to local authorities?

Do you mean in terms of responsibility or ownership? I am sorry, I was not quite clear on that.

Either.

In areas where there is a public right of access through the Scottish outdoor access code, local authorities are responsible for litter and so on. Much of our foreshore—the mean high-tide to mean low-tide position—is not necessarily beach or accessible so, in the same way, responsibility for clearing and management to allow for public access lies with the local authority or the adjacent landowner. There are many beaches that are accessed via land owned by private or public landowners and that responsibility would sit with them.

Thank you; I think I understand that.

I would like to pick up on a couple of points regarding local aspects and local authorities. You mentioned the Scottish Affairs Committee’s report and the fact that you had taken note of some of the recommendations; I refer you to the section that concluded that any devolution of powers through the Crown Estate’s decentralisation should be to the local authority level. You picked up on that, but do you not agree that the Scottish Government should have oversight of any future decentralisation to local government level?

That recommendation was made by the Scottish Affairs Committee and it is a matter for the Government, not for us.

That is fair enough. It was maybe too political a question.

I want to return to the matter of seaweed, which you mentioned earlier. You touched on the opportunities in seaweed cultivation and harvesting. How is that progressing? Will the Crown Estate be involved in promoting the initiative to local entrepreneurs around coastal areas?

There is quite a groundswell of people who are interested. There has been local community use of seaweed for a long time. One of our award winners has looked at collecting seaweed and at its use in different industries in the past. It does not need a lot of promotion for people to see the opportunities that are there.

We continue to invest in research projects to identify the types of seaweed that can be used for different opportunities—the seaweed that would be used for biomass or that side of things is completely different from the sort that might be used for pharmaceuticals. We supported a project that looked at research into over 100,000 different types of seaweed and their qualities. That is the sort of work that we are doing at the moment.

We have one consented site, and we are looking for an operator to bring industry experience and expertise to that. We are working quite hard on that with stakeholders across Scotland and beyond, as there are a number of international community members that are quite interested in seaweed cultivation. We have a site that has been approved through the regulated side of things—it is available, and we are working very hard to try to get that taken up.

10:45

Where is that site?

It is off the west coast, just north of Oban. It is a site of about 3 hectares that has been identified as a suitable location that is not too exposed, but is accessible. We are in discussions with the Scottish Association for Marine Science research centre on the appropriate way to take that forward. However, we are keen to bring industry into that because there is no point in researching and having public bodies go too far down that line without the backing of industry. That is where we are at the moment.

It is good to hear that that is moving forward at a pace. Thank you.

Is your question on the same subject, Claudia?

I have a follow-up question, but my main question is on a separate subject.

I would rather leave the separate subject for a minute. I want to stay offshore, unless you are—

Sure.

Staying offshore, where the seaweed is formed, will you explain the formula that you use for gathering revenues for offshore wind and tidal projects?

I am afraid that there is no single answer, nor a simple one. In respect of round 3 sites in particular, we would charge about 2 per cent of the value of the power produced per megawatt hour. That would be charged on an annual basis and collected twice yearly. For non-round 3 projects, where the commercials are slightly different, the value is a bit lower than that. For wave and tidal, it is again based on a fee per megawatt hour, but that is reduced by 50 per cent for the first five years when the plant becomes operational, to take account of availability issues for wave and tidal devices.

As I said, there is no simple answer—there are a number of different models and schemes depending on the round and the type of technology.

Does the London Array appear in round 3 or is it separate? Is it just a commercial arrangement?

The London Array would be a commercial arrangement under round 2.

How long has it been running for?

It became fully commissioned earlier this year, I think, and it is providing good availability numbers and wind numbers. As the offshore wind industry matures, people are getting better and the machines are becoming more efficient, and that is paying dividends in the availability of the machines and their productivity.

Will we be able to find a figure in your accounts for the income from the London Array for the current financial year?

For individual sites, no, as they would usually be covered by confidentiality. They are commercial agreements that we have with individual developers and generators. We will, as we do in our UK reports, publish the aggregate figure for renewables.

If you have a figure for commercials in round 2 that is slightly different from the round 3 figure, how can we find out what that is?

If I give you an example, that might help. For argument’s sake, let us use 2020 projected values. If we think about a round 3 site, for 1,000MW of installed capacity, we would expect to receive about £7.6 million per annum. For a round 2 site, it would be about £4.3 million, again based on 2020 numbers.

When the round 3s become available, will we be able to see the figures for Scotland’s production?

You will certainly see them as part of the Scotland report. There is a line for revenues from renewables, and the round 3 sites in Scotland, as well as the other Scottish territorial waters sites, will certainly be incorporated in that line.

What was the basis of the calculation that you decided on? For example, in the case of round 3, it is 2 per cent of the value of the power produced in megawatt hours.

It is a commercial discussion and debate that balances off the risk with other investment. For example, in round 3, we are directly investing more than £100 million in the programme, so there is a balance of risk and return.

It is important for us to understand this. It is clear that, in round 3, you have sought to maximise the income by encouraging large schemes.

We are trying to have a realistic return on the investment, bearing it in mind that we have had no return on round 3 sites at present. We have already paid out quite a considerable sum of money in round 3, so we are investing heavily with a view to making a return in due course. That commerciality, which was discussed earlier, is central to the thinking process.

I am interested to know about the agreement in the Treasury and the Crown Estate to support 15 per cent of the profits going in the direction of supporting the expenses of the royal family. Do you expect that to change if the income increases?

That is a matter for Government and not one for us.

I would like to add to the comments that Ronnie Quinn made, particularly in relation to your last-but-one question. Our job is to maximise the use of and return from the nation’s assets, one of which is the marine estate. I go back to an earlier question about communities. The coastal communities fund gets 50 per cent of the gross—not net—revenue of the marine estate. Once renewable energy installations in UK waters get going, it will be a colossal sum every year. I look forward to our communities right round the coast of the United Kingdom deriving enormous benefit from that. It will be a huge sum.

That is useful to know. Thank you. We move back on to the land now, with Claudia Beamish.

I want to briefly take Alan Laidlaw back to a remark that he made in answer to an earlier question about the investment criteria for the Crown Estate. Are they written down somewhere? We have discussed the balance and the responsibilities, but are the criteria written down in a form that the committee could look at?

We set our investment criteria each year against the market, so there is a fluctuation in the interest. We could give you an outline of that. There are sensitivities regarding the commerciality of certain assets and particular areas that we are going to invest in, but we could give you a summary of the investment criteria to show the sorts of things that we are looking to do.

My side of things—I think that we discussed this last year—is about opening up opportunities in the coastal estate on aquaculture, marine biomass and seaweed, ports and harbours and marine leisure. I learned recently that someone believes that marine leisure has the potential to be bigger than golf in Scotland, and we know how successful that can be for rural areas. I want to see marine leisure grow. On the rural side of things, it is about diversification into tourism, and ensuring that opportunities are identified and we can react to them. We can give you a summary of those factors if that would help.

That would be useful. Thank you.

Before we move on, two members have questions that arise from that.

Thank you for letting me in, convener. Gareth Baird made the point that there are tremendous opportunities from renewables given the investment that you have made and income over the next few years. It is the Scottish Government’s policy that is driving that. What percentage of the income that is raised will be spent locally on the people who may be affected?

Under the current schemes, 50 per cent of our marine surplus is sent back to the coastal communities fund, which is administered by the Big Lottery Fund.

That will be invested locally in the areas where people will see the turbines a couple of miles off their coast?

It will be for the Big Lottery Fund to award that funding. We do not have control over that.

I take you back to the figures on property value on page 9 of the annual report. They are on the third line down. Subscript 1 tells me that the line

“excludes properties held within joint ventures which hold property UK wide and cannot be disaggregated.”

With the greatest respect, they can always be disaggregated. Why are they not? There is no possibility that you do not know where a property is and there is no possibility that you cannot have separate columns in the cash book.

We know exactly where it is. That line relates to the Fort Kinnaird property. It is not possible to disaggregate it from the joint venture structure that it sits within.

Would an accountant not suggest to you that, if you could not disaggregate the numbers—and I still do not really believe that—you should at least be able to provide a sensible professional estimate?

I confess that I am not an accountant, but my understanding is that, under the accounting rules, it has to go into the main accounts. Disaggregation could be arbitrary and perhaps misleading, and it would not be auditable for inclusion in these numbers. I am afraid that I do not know about the technicalities.

I will buy that as a set of accounting rules, but it does not alter the fact that there will be an estimate in there somewhere, which could be in the footnotes even if it is not auditable. I am just bothered, as a public interrogator, that there is a number in there that is completely hidden by accounting rules. I am sorry—I am the son of an accountant. I do not believe that accounting rules prevent you from working out a number, even if it is an unauditable estimate and you have to sign it off as such.

Can we come back to you on that?

That would be helpful. We would like to see numbers that are as defensible as they can be. To say, “I cannae do it” really will not do.

Two questions arise. First, would any other properties in Scotland come under that heading? Secondly, if the Fort Kinnaird property was to be sold, for example, would the proceeds be disaggregated in your accounts? Would there be a figure at that point that showed what Scotland had generated?

There are no other properties. I cannot answer the second question, but we will come back to you on that, if we may.

11:00

We go back to Claudia Beamish, who has a question on a separate subject.

The land reform review group set out in its interim report in May that the position of the Crown Estate is frequently raised in discussion. The group might consider it further in phase 2 of its workstream, which, as you will know, has started. Can any of you update the committee on any discussions that have been had with the land reform review group? Can you clarify whether there is an opportunity within your own guidelines for consideration of community buy-out in the future?

We submitted a response to the LRRG in January or February. That is available on our website as it was put up at that time—

Just so that you know, I was asking about the second phase, beyond the—

Yes. We are looking at a response to the second phase, which is coming up in the next few months. We have a meeting booked in for our chief executive and Gareth Baird to meet Alison Elliot, the chair, and some of the advisers of the group to have that next stage of discussion. As soon as that correspondence came up, we wrote and offered to meet them. I think that that is due to happen around the 26th of this month. We are part of that discussion and we propose to submit a response to the second stage of the process.

Can you reassure me that there has been an assessment of the discussion that took place and the comments that were made about the Crown Estate? Can you highlight any of that for us?

I am sorry, but will you clarify the question? If you are asking whether we have looked at the responses, the answer is yes—absolutely.

Do you have any comments on the comments that were made to the land reform review group in relation to the Crown Estate?

There were a number of positive and not-so-positive comments, and we have been working through those. There were more than 400 responses to the LRRG, and the phenomenal number of responses shows the depth of feeling that exists across the land use sector. I have not finished reviewing them, but I am a good way through them and I am identifying where there are areas for improvement.

We know the areas that are particularly strong and the areas where people have strong views and we are identifying what we can do to help to improve things there, if indeed we can. There will always be polarised views on these matters. We will be able to respond to some of them, but not to others.

Can you tell us today about any specific areas of concern that have come up, which might be in more than one submission? You said that you are considering the views that have been expressed. Can you highlight anything that you are looking to address?

Not particularly because, once we have gone through the whole process, we will have to have a discussion at a senior level to make sure that we respond proportionately and accurately. Some of those who responded will not like what we are doing, despite its being supported by other parts of the community. A significant number of individuals, as well as groups, responded, and we need to make sure that the response is proportionate. I would not say that any particular areas have been highlighted. A vibrant, healthy Scotland is something that we support as well. At times, some of the views that have been expressed are against the opportunity to develop and strengthen communities.

You also asked us about community buy-outs. The legislation is clear about those. None have been registered in terms of our rural interests. We have had discussions with some community ownership bodies about foreshore interests, whether that is through adverse possession, regulating leases or indeed LMAs, but there have been no registrations of community buy-outs of Crown Estate interests.

I am aware, to some degree, of what the legislation details, but I wonder whether, from the Crown Estate’s perspective, anything is preventing something from going forward.

Not at all.

Mr Baird, will you give us an idea of the Crown Estate’s priorities for Scotland for the next five to 10 years?

I can genuinely say that our whole board of commissioners, the executive board, and particularly the team in Edinburgh want to drive the Scottish interest forward as hard as we possibly can. That sounds an overarching response, but I promise you that it is absolutely true, and particularly in line with Scottish Government targets.

We have already mentioned aquaculture, and stringent targets have been set there. We hope that we can help the industry and local authorities to get over all the hurdles to increase production, and we hope that our help in funding research in a lot of areas in Scotland will help. There is a huge amount of attention on energy and infrastructure in what is a nascent industry. Ronnie Quinn mentioned the difficulties of getting the kit in the water. Recently, more than half our board, along with our energy and infrastructure staff, were up in Orkney looking particularly at wave and tidal developments. As a land-based person, I think that the amount of innovation, human energy and—not least—investment required for that industry is absolutely mind boggling. It is going to be a long and perhaps torturous trail to develop all the opportunities.

The huge business opportunities that exist for all the people of Scotland and indeed the United Kingdom were discussed earlier. In Scotland, we are pushing as hard as we can to get over all the hurdles.

I will give some specifics on energy and infrastructure. In offshore wind, the immediate push and interest is in having some of the commercial offshore wind farms consented in this financial year and we are working with the developers to move that forward. Looking a bit further ahead, we have reshaped our team and we are now putting more emphasis on the delivery side. We will be working with developers on getting from the point of consent through to the point of deployment and getting to a financial close. We are putting a lot more effort into that because that is the phase that the offshore wind industry, in respect of those sites, is in.

On the wave and tidal side, the goal is to accelerate the deployment of first arrays. That is a fairly brutal one. In addition, and to help to facilitate that, in January this year we announced £20 million of funding to go to up to two projects that intend to deploy in those first arrays. However, we anticipate that we will still be a minority holding in that investment. On the wave and tidal front, there is a big push.

We are also putting a lot more effort into testing and demonstration of both offshore wind and wave and tidal. We are in the throes of an invitation to tender for offshore wind test and demonstration sites. In fact, I think that it closes today. Later this month, we will be announcing new wave and tidal test and demonstration leasing. We believe that that is quite innovative. For the first time, we are suggesting that the new test and demonstration zones could be managed by third parties. We have already been in discussions with some local authorities, for example, in respect of that. On the energy infrastructure side, it is not going to be a quiet time.

I have two specific questions. What are the two investments in which you are a partner and which you mentioned in the first part of your answer? Secondly, where will those test and demonstration effects be?

Sorry, but which investment—

I presume that at least one of them is in my constituency.

We are still doing due diligence on a number of projects on the wave and tidal first arrays, so at this stage it would not be appropriate for me to say where they are. As I say, we have been working with Marine Scotland and local authorities on the wave and tidal test and demonstration zones. An announcement on that will be made later this month, and the zones will be published at that time.

I thought that we might have been given a sneak preview, since we have oversight of local authorities and so on but, obviously, you are keeping your cards close to your chest.

To add to what Ronnie Quinn said on your question about the Scottish element, it is fair to say that the team in Edinburgh is enormously proud that the first two applications for planning consent in the nine round 3 zones are Scottish. That reflects well on the joint working between the Scottish Government, Marine Scotland, our team and the developers. It has been an absolute pleasure for me to meet the developers, who have brought considerable resource to Scotland—in terms of cash and intellect—and to see our two zones coming up first for planning consent. That is a great credit to the co-ordinated work that has been going on in Scotland.

Indeed.

Jim Hume has a supplementary question.

I want to follow up on the Crown Estate’s business planning and strategy, but getting back on to the land. You are responsible for 50 per cent of the coastline, but you also have large interests on land. I saw some of those in my region a year or two ago. What sort of incentives or plans do you have for new entrants into agriculture? What forms of tenure do you offer? Are they limited duration tenancies, or do you offer what I would call old-fashioned secure tenancies?

The work that we do with new entrants has two tracks. There is the open market stuff, which is challenging, because we do not always get units back, and then there is the encouragement of the next generation within our existing tenant group. One of the overquoted statistics in United Kingdom and Scottish agriculture is that the average age of a UK farmer is 58. However, that is not the average age of the people whom we deal with on the ground. One significant piece of work that we are doing is to ensure that, where the next generation is in active management of a farm or business, we talk to them if we are talking about new agreements. That is a key point from my point of view. We look to strengthen our understanding of their business by doing business with them.

As I said, we do not get a lot of units back, and there is not a huge churn. Unfortunately, Mr Hume, you were not able to join us at Glenlivet a couple of weeks ago, but when the committee was there we showed an example of where a business failure had allowed two business units to come back. One of them went on the open market and has gone to a new entrant, Pauline Mitchell, whom members met during the visit.

11:15

At the same time, we are looking to create opportunities within the existing tenant group. We use the limited duration tenancy structure—new, modern forms of LDT. The terms vary, but many of the agreements that we have put in place on LDTs have taken the next generation to 65. So if someone is 40, it is a 25-year agreement, and if they are 30, it is a 35-year agreement.

I can think of one example in Jim Hume’s constituency where, following opencast coal extraction, there is an agreement of more than 30 years with a new entrant. That is post coal, and involves mixed livestock and arable. It has to be a long-term agreement, because the operator will have to work really hard to get the ex-opencast ground into production. We have identified a good young operator and a structure that works for both of us. Hopefully, that means that he can go forward with good long-term plans and make use of the Scotland rural development programme, when it comes out of the shadows in the next couple of years, to really invest in that holding and get that investment back.

Some members met one of our tenants at Glenlivet whose agreement is for 15 years in a livestock unit, which was one of the first LDTs to be open-marketed in Scotland. His view is that it will take five years to get it right, five years to make it work and five years to enjoy it and invest for the next opportunity.

Just to clarify—perhaps I should know this already—are part of the lands for which you are responsible in-hand managed, or do you let everything?

The farmland is let, but forestry is in-hand managed, on the wildlife and public recreation side of things. The productive agricultural land is let, and the vast majority of it is let under secure tenancies rather than annual cropping licences.

I thank our witnesses for their useful answers, which prompt us to explore further the work of the Crown Estate in future. The session has been enlightening compared to the last time that the Crown Estate came to the committee, perhaps because of the focused questions that we began to formulate, which has been helpful.

I wonder whether the overall chief executive of the Crown Estate from London might be interested in coming along and joining us and you, Mr Baird, with your team, at some point in future. It might be useful at this stage for us, politically, to understand the relationship. I leave you with that thought. Thank you for your attendance and your involvement.

Thank you very much for welcoming us today. We are eager to participate in as much communication with Government as we can, and I will certainly put that proposal to our chief executive. She is up in Scotland a lot. Indeed, we have a two-day board meeting here later this month, with a reception at Our Dynamic Earth on 25 September, to which I hope you have all had invitations. We would love to see you there, where we will be able to explain even more about what the Crown Estate is doing for Scotland. To reiterate, we would love to see you at Bell’s Brae—any of you at any time, individually or collectively—or at any of the other assets that we manage in Scotland.

Thank you.

We will take a short break and then come back in public to consider agenda item 3.

11:18 Meeting suspended.

11:24 On resuming—